The latest mainland China gold import figures via Hong Kong show a 140% increase over the first two months of the year, suggesting Chinese demand is far from slowing down.
China's gold purchases increased a record 41% last year...
The Gold Shares Exchange Traded Fund (GLD) dumped 500 tons of gold onto the market last year… and China bought as much as they could... 1,176 tons, to be exact.
Global investor Jim Rickards says, "Gold purchased by the Chinese will not see the light of day again for the next 300 years… and is not available for trading."
You see, there's 170,000 tons of gold in the world… but not all of it is traded. The traded gold is known as the "floating supply," and it's this gold that determines price.
To squeeze the gold market, you don't need to control the total supply of gold... you just have to buy up the floating supply. And China is doing just that.
Rickards says this scenario could cause gold to increase fivefold in just three to five years...
In just the past two years, U.S. gold scrap exports declined an amazing 80%. What's going on here? Is the U.S. starting to run out of gold scrap? Either the U.S. is running low on gold scrap to export or the market is refining more to fill the huge amount of domestic and foreign bullion [...]
The share price of Barrick Gold (ABX) has been flattish over the past 6 months. I expect the share performance in 2014 will continue to be pressured by the company's cloudy liquidity prospect and believe investors can find better risk-reward opportunities elsewhere.
In Q4 2013 earnings call, management guided annual gold production of 6.0 moz to 6.5 moz for 2014 at adjusted operating cost of around $600 per oz. The production guidance is well below the actual level in 2013, while the cost projection is higher. In addition, management also guided a lower copper production target for 2014 and expects the firm to incur higher interest expense and effective tax rate in 2014. All of these disappointing figures are expected to significantly drive down operating cash flow from $4.2B in 2013 to slightly above the $3.0B level, based on my estimate.
Wow, what a COT week! In gold, we have MASSIVE short buying on the part of the producer merchant to the tune of almost 15,000 contracts short picked up. Notice the total commercials up almost 21,000 contracts short. That means they are getting VERY READY to do something big! By SD Contributor Marshall Swing: What [...]
In his news conference two weeks ago following the ECB's policy decision President Mario Draghi explicitly noted the importance of the euro exchange rate to European economic growth and inflation.
Let me start first with a standard statement. I mean, the exchange rate is not a policy target for us. But the exchange rate is very important for growth and price stability. And there is no doubt that if we look backward to the trough of 2012, -- to the trough in the exchange rate in 2012, and we look at the exchange rate today, and we ask ourselves the question, how much has this counted for the low inflation that we see today?
The implication was clear, ignore our standard disclaimer. The strong euro has had a negative effect on growth and inflation, the ECB's two most pressing concerns.
Financialization results when leverage and information asymmetry replace innovation and productive investment as the source of wealth creation. When the profits from financializing collateral and leveraging those bets to the hilt far exceed generating wealth by creating products and services, the economy is soon hollowed out as the perverse incentives of financialization start driving every [...]
Toronto, Ontario – (March 25, 2014) Argonaut Gold Inc. (TSX: AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to announce its financial and operating results for the fourth quarter and year ended December 31, 2013. All dollar amounts are expressed in United States dollars unless otherwise specified.
4th Quarter
Change
Year End
Change
2013
2012
2013
2012
Financial Data (000's except for earnings per share)
Revenue
$34,604
$52,347
↓34%
$165,061
$187,119
↓12%
Gross profit
$8,553
$26,641
↓68%
$59,065
$95,196
↓38%
Net income – excludes one-time item1
$2,157
$19,070
↓89%
$26,843
$64,856
↓59%
Net income (loss)
($14,674)
$19,070
↓177%
$10,012
$64,856
↓85%
Earnings per share – excludes one-time item1
$0.01
$0.19
↓95%
$0.18
$0.68
↓74%
Earnings (loss) per share – basic
($0.10)
$0.19
↓153%
$0.07
$0.68
↓90%
Cash flow from operating activities before changes in non-cash operating working capital and other items
$9,315
$24,134
↓61%
$61,734
$83,405
↓26%
Cash and cash equivalents
$81,076
$190,826
↓58%
Gold Production and Cost Data
Gold ounces loaded to the pad
49,068
48,174
↑2%
177,889
191,642
↓7%
Gold equivalent ounces ("GEO") produced2
28,734
32,871
↓13%
120,433
110,496
↑9%
Gold equivalent ounces sold2
27,823
30,791
↓10%
118,877
112,492
↑6%
Average realized sales price
$1,248
$1,698
↓27%
$1,392
$1,662
↓16%
Cash cost per gold ounce sold3
$654
$587
↑11%
$644
$597
↑8%
1 Excludes deferred tax charge of $16.8 million in Q4 2013 due to Mexican tax law reform. 2 Gold equivalent ounces ("GEO") assumes gold plus the gold equivalent of silver using a ratio of 55:1. 3 Cash cost per gold ounce sold is net of silver by-product (see Non-IFRS Measures section).
2013 Financial Highlights:
Net income of $26.8 million, prior to a one-time deferred tax chargeof $16.8 million in 2013.
Cash and cash equivalents was $81.1 million at December 31, 2013.
Successfully carried out capital expansion programs to enhance production at El Castillo and La Colorada.
Production increased to over 120,000 gold equivalent ounces, a 9% improvement over 2012.
Cash cost per gold ounce sold of $644, within guidance of $630-$660.
2013 Company Highlights:
Completed the purchase of the San Agustin project from Silver Standard Resources Inc.
Announced positive prefeasibility study on Magino which indicated an after-tax internal rate of return of 18% and an after-tax net present value of $199 million, while incorporating only 40% of the current mineral resource estimate.
Drilling and metallurgical test work provided for the inclusion of an additional 360,000 new gold ounces of in-pit mineralization, consisting of more than 315,000 ounces in the measured resources category and more than 45,000 ounces in the indicated resources category. These are summarized in the Mineral Resources section at the end of this document.
Drilling program at Veta Madre led to a new resource of 110,000 new gold ounces in the indicated category. This is summarized in the Mineral Resources section table at the end of this document.
Completed acquisition of the La Colorada royalty to establish 100% ownership of La Colorada.
A surface and mining rights expansion agreement with Richmont Mines Inc. ("Richmont") was signed. This provides a key strategic initiative for the Company as now the full Magino resource envelope (an additional 60% of the resource estimate) may be exploited while allowing for additional exploration upside on the Richmont ground.
San Antonio exploration and permitting process continued.
Expenditures of $185.7 million on mineral properties, plant and equipment in 2013, including $88.1 million on acquisitions.
Operations:
El Castillo
Q4 production of 20,848 gold ounces.
Full year production of 94,804 gold ounces.
Per ounce cash cost sold of $699, slightly below guidance of $700-$725.
During Q4, 39,269 gold ounces loaded on the pad.
West side crusher and overland conveyor project was completed and 1.3 million tonnes was moved during the fourth quarter.
New south waste dump is operational.
Drilling and metallurgical test work provided for the inclusion of an additional 360,000 new gold ounces of in-pit mineralization, consisting of more than 315,000 ounces in the measured resources category and more than 45,000 ounces in the indicated resources category. These are summarized in the Mineral Resources section at the end of this document.
La Colorada
Q4 production of 7,017 gold ounces and 47,759 silver ounces, for 7,885 gold equivalent ounces (at 55:1 conversion).
Full year production of 22,544 gold ounces and 169,673 silver ounces, for 25,629 gold equivalent ounces (at 55:1 conversion).
Per ounce cash cost sold of $417, below guidance of $450-$475.
During Q4, 9,799 gold ounces and 136,476 silver ounces loaded on the pad.
La Colorada pit is now fully opened, and the average life of mine grade was achieved by year-end.
Drilling program at Veta Madre led to a new resource of 110,000 new gold ounces in the indicated category. This is summarized in the Mineral Resources section table at the end of this document.
CEO Commentary
Peter Dougherty, Argonaut's Chief Executive Officer stated “2013 was a year in which Argonaut Gold accomplished key advancements across all of our projects. We added ounces at our operating mines, expanded the ground surrounding our projects and brought on a new exploration property within 10 kilometers of our main producing El Castillo mine. We are also proud that the Company beat guidance on cash cost per ounce sold at both properties, coming in below $700 at El Castillo and under $450 at La Colorada.
2014 will be a key year for the organization as production is expected to increase to 135-150,000 gold equivalent ounces at El Castillo and La Colorada. We aim to expand our resource base further through drilling at San Agustín and La Colorada. In addition, Argonaut will be moving forward with permitting at San Antonio and Magino."
Financial Results – Fourth Quarter 2013
During the fourth quarter of 2013, revenue was $34.6 million from gold sales of 26,918 ounces. Gross profit was $8.6 million for the quarter. Cash cost per gold ounce sold in the quarter was $654 (compared to $587 for the same period in 2012). Cash cost per gold ounce sold is a non-IFRS measure, see note below.
During the quarter, profit from operations was $5.1 million. Net income for the quarter, prior to a one-time item, was $2.2 million or $0.01 per basic share. Net income was adversely affected by a one-time, non-cash deferred income tax charge of $16.8 million ($11.4 million for operating properties, $5.4 million for exploration/development properties) as a result of the Mexican tax law reform approved by the President of Mexico in December 2013.
Cash and cash equivalents was $81.1 million at December, 31, 2013. Capital expenditures in the fourth quarter were $19.6 million, primarily as a result of infrastructure improvements at the El Castillo and La Colorada mines, as well as stripping at La Colorada.
Financial Results – Year End 2013
For the year ended December 31, 2013, revenue was $165.1 million from gold sales of 114,909 ounces. Gross profit was $59.1 million for the year. Cash cost per gold ounce sold in the year was $644 (compared to $597 for the same period in 2012).
For the full year, profit from operations was $43.9 million. Net income for the year, prior to a one-time item, was $26.8 million or $0.18 per basic share. Net income was adversely affected by a one-time, non-cash deferred income tax charge of $16.8 million ($11.4 million for operating properties, $5.4 million for exploration/development properties) as a result of the Mexican tax law reform approved by the President of Mexico in December 2013.
El Castillo Operating Statistics
4th Quarter
Year End
2013
2012
Change
2013
2012
Change
Mining
Tonnes ore (000's)
3,764
3,321
↑13%
13,621
11,962
↑14%
Tonnes waste (000's)
3,810
3,374
↑13%
13,376
12,091
↑11%
Tonnes mined (000's)
7,574
6,695
↑13%
26,997
24,052
↑12%
Waste/ore ratio
1.01
1.02
↓1%
0.98
1.01
↓3%
Heap Leach Pad
Tonnes ore direct to leach pad (000's)
1,045
2,034
↓49%
6,352
7,561
↓16%
Tonnes crushed (000's)
2,769
1,282
↑116%
7,304
4,555
↑60%
Tonnes overland conveyor (000's)
1,312
-
N/A
1,533
-
N/A
Production
Gold grade (g/t)
0.32
0.37
↓14%
0.35
0.39
↓10%
Gold loaded to leach pad (ozs.)
39,269
39,329
↓0.2%
154,581
151,462
↑2%
Gold produced (ozs.)
20,848
25,805
↓19%
94,804
87,712
↑8%
Gold ounces sold
20,620
23,595
↓13%
92,675
89,881
↑3%
Cash cost per gold ounce sold
$710
$661
↑7%
$699
$635
↑10%
Summary of Production Results
Total tonnes mined increased by 13% for the fourth quarter 2013 over fourth quarter 2012 and 12% year over year. The ounces loaded to the pads in the fourth quarter were consistent in 2013 and 2012; however, approximately 36% of these ounces came from transitional ore where recoveries are lower. Year over year, there was a 2% increase in ounces of gold loaded to the pad.
Gold production of 20,848 ounces in the fourth quarter of 2013 was 19% lower compared to the fourth quarter of 2012, primarily due to lower recoveries encountered in the transition material processed. Full year production of 94,804 ounces was an 8% increase over 2012 production due to increased tonnage processed. We anticipate gold equivalent ounce production of 90-100,000 ounces for 2014.
The strip ratio of waste to ore decreased in the fourth quarter to 1.01 compared to 1.02 in the fourth quarter of 2012. The strip ratio for the year ended December 31, 2013 was 0.98 compared to 1.01 for the year ended December 31, 2012, reflecting a push to the southwest side of the pit.
The Central Bank of Iraq said it bought 36 tons of gold this month to help stabilise the Iraqi dinar against foreign currencies, according to a statement from the bank that was emailed this morning. It is very large in tonnage terms and Iraq's purchases this month alone surpasses the entire demand of many large [...]
Financial expert and best-selling author, James Rickards, thinks the "international monetary system is headed for a collapse." . Fast forward to today. When the next collapse comes, it is going to be bigger than the last one. It's going to be exponentially bigger. The five biggest banks were too big to fail in 2008, today they are bigger. [...]
Wow, what a COT week! What a few down days since the COT close last Tuesday afternoon… In silver, we have seen serious buying to the tune of almost 8,000 new contracts. Here is the prime example of what I have told many people over time that new open interest does not necessarily mean price will go up. In gold, we have MASSIVE short buying on the part of the producer merchant to the tune of almost 15,000 contracts short picked up.
Recently, the global gold market has been dominated by the situation in Crimea and the latest Federal Open Market Committee. After trading above the $1,390 an ounce level for the first time since September 2013, gold's upward momentum was thwarted by the outcome of the latest FMOC meeting.
Up until a few weeks ago, Crimea was probably unknown to most people around the world. So why, so suddenly, has this region had such an impact on global equities, currency and financial markets. And, the events unfolding there could possibly change the complexion of Europe, if not the rest of the world.
The answer is simply because the action of one country (Russia) does not suit the aspirations of many Western countries, the United States in particular. And, as a consequence, this region has become the centre of a political standoff between Russia and most of its Western counterparts.
For months, main stream media has focused on the Ukrainian revolution, which ignited in November after the recently ousted government suspended the signing of a free-trade agreement with the European Union. Instead of forging ties with Europe, Ukrainian President Viktor Yanukovych opted to seek closer economic integration with Russia.
After months of protests, Yanukovych, was chased out of Ukraine, and a pro-European government was established in Kiev. A few short weeks later, Russia responded by invading Crimea, under the guise of protecting ethnic Russians. However, it is important to understand that there is a long standing history between Russia and Crimea.
Although Crimea was part of Ukraine, it had its own government, laws, and constitution.
Throughout its history, the country has been a target of invaders, including the Greeks, Huns, Byzantines, Ottoman Turks, Mongols, Venetians, and—most recently—the Russians.
Crimea was administratively part of Russia for 200 years and has been part of Ukraine for only 60 years having been given away by Soviet leader Nikita Khrushchev as a gift to Ukraine in 1954. Some 60% of the population are Russian-speakers, with Ukrainian-speakers and Tatars making up the rest.
While Crimea remained part of Ukraine, psychologically Russians did not accept that. And, it is interesting how history often repeats itself. During the Crimean War the Russians manoeuvred their fleet to prevent the British and French navies from entering Sevastopol Harbour. Russian ships blocked the exit to the harbour at the same spot last week to prevent Ukraine's tiny fleet from making a getaway.
The Crimean War was also where Florence Nightingale gained renown for the heroic care of the nursing sisters that she led and for her advocacy for Britain's wounded.
Now that Russia has annexed Crimea, leaders of the Western countries are condemning the actions of the Kremlin. It is quite ironic given the recent history of U.S. involvement everywhere. It is far more reasonable to accept the actions of Russia which is right next door, than it is for the U.S. government to be involved in places such as Libya, Iraq, Afghanistan, Pakistan, Syria, and Somalia, just to name a few. And Russia is not bombing and destroying cities in Crimea like what was done in Iraq, and Libya. The Russian government called for a referendum that resulted in an overwhelming majority of the population wanting Crimea to return to Russia.
The questions on the ballot paper were: "Are you in favour of the Autonomous Republic of Crimea reuniting with Russia as a constituent part of the Russian Federation?" And: "Are you in favour of restoring the Constitution of the Republic of Crimea of 1992 and of Crimea's status as part of Ukraine?" The middle way of greater autonomy within Ukraine is not an option.
According to Wikipedia A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment or a law. Besides initiative and recall election the referendum is one of the three pillars of direct democracy.
Direct democracy (also known as pure democracy is a form of democracy in which people decide (e.g. vote on, form consensus on, etc.) policy initiatives directly, as opposed to a representative democracy in which people vote for representatives who then decide policy initiatives.
It also seems hypocritical that Western powers have dismissed the ballot as unconstitutional and part of an attempt by Moscow to gain spurious legal cover for the annexation of Crimea, when they accepted the results of similar referendums held in the Falklands, which the UK won back from Argentinian occupiers following a brief war in 1982, and the referendum in South Sudan.
A referendum on political status was held in the Falkland Islands on 10–11 March 2013. The Falkland Islanders were asked whether or not they supported the continuation of their status as an Overseas Territory of the United Kingdom.
On a turnout of 92%, an overwhelming 99.8% voted to remain a British territory, with only three votes against
The British Prime Minister, David Cameron, expressed his delight after the Falkland Islands voted overwhelmingly to remain part of Britain. All but three who cast a vote said they wished the Falklands to remain part of the UK’s overseas territory. David Cameron said that Argentina and the rest of the world should heed the wishes of the islanders. The prime minister said Argentina should take “careful note” of the referendum result and that Britain would always be there to defend the Falkland Islanders. Here is the link to his news statement on UK television.
On 9 July 2011 South Sudan became the newest country in the world. The birth of the Republic of South Sudan was the culmination of a six-year peace process and a new chapter in a region that has seen little peace in the last 50 years. The United States backed the peace treaty that put the referendum in motion. And, the President of the United States Barack Obama said the result of the vote was "inspiring” as voters decided “their own future [and marked] another step forward in Africa’s long journey toward justice and democracy”. He also said that the United States would recognise South Sudan’s independence when formalised.
Meanwhile, a referendum on whether Scotland should be an independent country will take place on Thursday 18 September 2014. Following an agreement between the Scottish Government and the United Kingdom government, the Scottish Independence Referendum Bill, setting out the arrangements for this referendum, was put forward on 21 March 2013, passed by the Scottish Parliament on 14 November 2013 and received Royal Assent on 17 December 2013. The question to be asked in the referendum will be “Should Scotland be an independent country?” as recommended by the Electoral Commission.
British Prime Minister David Cameron said that his Government supported the holding of the referendum and would "respect and defend" the result.
It seems to me that the Crimean peninsula is far more important to the Russians than the Falkland Islands are to Britain.
Looking at the situation developing in the Ukraine I can't help wonder why it is that leaders of the USA, UK and EU have rejected the results of the referendum in Crimea yet, they were completely accepting of the referendums in the Falklands and Sudan. Obviously, nothing is as clear as it appears. And, what I also found fascinating was the speed at which the EU suddenly signed an association agreement with Ukraine in Brussels.
EU President Herman Van Rompuy and other EU leaders signed the agreement with Ukraine’s Prime Minister Arseniy Yatsenyuk on the sidelines of an EU summit in Brussels. The two sides signed three of the seven chapters of the agreement.
“This deal covers the most existential and most important issues, mainly security and defence cooperation,” Yatsenyukd said. “This deal will establish a joint decision-making body, which is to facilitate the process of real reforms in my country. And this deal meets the aspirations of millions of Ukrainians that want to be a part of the European Union.”
European Commission President Jose Manuel Barroso described the bloc’s intent as the first day of the EU summit concluded in the early hours of the morning on March 21.
“We are already going to sign with the prime minister of Ukraine the political provision of the association agreement and seal the strong political partnership that brings Ukraine and the European Union closer together,” Barroso said.
“This is the democratic choice that Ukraine has made. It is our firm intention to sign the remaining parts of the agreement in due course. Europe is committed to Ukraine for the long term,” he added.
The signing ceremony came as Russian President Vladimir Putin formally signed the annexation of Crimea, having secured backing in both chambers of the Russian legislature.
The trade portion of the EU accord, which is the bulk of the treaty, is to be signed after May.
Barroso spoke immediately after the EU leaders agreed to slap an asset freeze and travel ban on 12 more Russians and Ukrainians over Moscow’s annexation of Crimea.
Meanwhile, the United States extended its sanctions against Moscow earlier on March 20, adding dozens of influential Russians, including a number of individuals within what the U.S. Treasury described as Russian President Vladimir Putin’s “inner circle.”
It soon became apparent to me that the main issue at stake here is the supply of natural gas. A number of key gas pipelines from Russia to Western Europe run through Ukraine. Around 58% of gas consumed in Ukraine is imported from Russia and some 66% of gas imported to the EU from Russia transits the Ukraine. Now, things are getting a lot clearer to me. In pure economic terms, a shift to Russia would likely change the dynamics of how Western Europe is powered. So, if Russia had control over the Ukraine, Europe's supply of gas would become even more dependent on Russia.
Meanwhile, the Federal Reserve monetary policy meeting on Tuesday and Wednesday will give investors some clues of what the Fed thinks regarding the economic outlook. So far most economists are still expecting the Fed to stay on track with reducing its quantitative easing program.
Meanwhile, the FOMC’s March meeting turned out to be more hawkish than expected and the Fed unveiled more stimulus tapering, pledged continuing low interest rates, and cut its 2014 GDP forecast.
Besides announcing a further reduction of monthly asset purchase by USD10 billion policymakers have brought forward the tightening cycle and upgraded the labour market outlook. The Fed also modified its forward guidance, removing the thresholds of 6.5% unemployment rate and 2.5% inflation rate. The central bank, however, stressed that ‘the change in the Committee’s guidance does not indicate any change in the Committee’s policy intentions as set forth in its recent statements’.
The situation in Crimea shows how small events can escalate into a major crisis, and how the majority of politicians have seemingly become nothing more than legalised racketeers and duplicitous philanderers who serve themselves instead of serving their citizens. I have no doubt in my mind that some government official somewhere stands to lose or make substantial amounts of money from the on-going turmoil in Ukraine. These types of people are not capable of creating wealth but are only able to use their positions of power to divert funds or steal tax payer's money in order to enrich themselves.
And, as I have stated countless time, the best protection against corrupt governments, geopolitical tensions, and expansionary monetary policies of central banks is gold and silver.
TECHNICAL ANALYSIS
Gold prices hit resistance at around $1380/oz. but are still above the 200 day MA.
There have been runs on two small banks in China with depositors fighting to get through the doors to make withdrawals when they opened. Is this the first crack in the great wall of Chinese credit?
Reuters reported local news about queues outside the Sheyang Rural Commercial Bank in Yancheng yesterday and the Rural Commercial Bank of Huanghai faced similar rushes by depositors today after rumors of insolvency at Sheyang. Officials say it is impossible for a Chinese bank to go bankrupt.
Real estate crash
However, financial institutions have made large loans to private and state developers whose project lie abandoned and their loans cannot be repaid. Where are the banks to find the money to pay out to depositors who want to withdraw their money?
Observers said the situation highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, so the cast-iron banking system may not be as strong as it seems. Unregulated rural cooperatives are, nonetheless, admitted to be a weak and unregulated part of the credit system.
The obvious comparison is with the ‘too big to fail’ banks of the West which suddenly became insolvent in the subprime crisis of 2008. Is this the Chinese version of the Northern Rock bank run that hit the UK in 2008, another country whose assurances that bank runs were a thing of the past proved nonsense.
First default
This month China allowed its first ever commercial bond default at Chaori Solar Energy and a heavily indebted developer in Zhejiang province is at risk of defaulting on $565 million in loans, according to local media.
China watchers reckon this is a part of a controlled implosion of the credit system and will not be allowed to spiral out of control like Lehman Brothers in 2008. Well they would say that wouldn’t they?
Good intentions are one thing. Fulfilling them may be a different matter. Did the Federal Reserve not think it had events under control in 2008? Perhaps China will surprise us all. But bank runs are not a good sign. Is this why the Chinese bought more than 2,000 tonnes of gold last year?
The Central Bank of Iraq said it bought 36 tons of gold this month to help stabilise the Iraqi dinar against foreign currencies. 36 tonnes is a lot of gold in tonnage terms and Iraq's purchases this month alone surpasses the entire demand of many large industrial nations in all of 2013.
Today's AM fix was USD 1,314.75, EUR 951.82 and GBP 796.87 per ounce. Yesterday's AM fix was USD 1,322.00, EUR 960.34 and GBP 801.94 per ounce.
Gold dropped $23.40 or 1.76% yesterday to $1,309.50/oz. Silver fell $0.31 or 1.53% at $19.98/oz.
Gold in U.S. Dollars, 5 Year – (Thomson Reuters)
Gold rallied from the lowest price in more than four weeks on safe haven demand after the G7 nations threatened more sanctions against Russia after the annexation of Crimea.
Meeting for the first time since last week's annexation of Crimea by Russia, G7 leaders said they won't attend a G8 meeting that had been set for Sochi, on Russia's Black Sea coast, and will instead hold their own summit in June in Brussels. The G7 said in a statement that they remain ready to "intensify actions", including coordinated sectoral sanctions.
Trading volumes on the COMEX in New York today are 49% higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.
Palladium fell 1% to $786.20 an ounce. The precious metal rose above $800/oz yesterday, the highest since August 2011, on concern that supplies from top producer Russia will be disrupted.
The Central Bank of Iraq said it bought 36 tons of gold this month to help stabilise the Iraqi dinar against foreign currencies, according to a statement from the bank that was emailed this morning.
It is very large in tonnage terms and Iraq's purchases this month alone surpasses the entire demand of many large industrial nations in all of 2013. It surpasses the entire demand of large countries such as France, Taiwan, South Korea, Malaysia, Singapore, Italy, Japan, the UK, Brazil and Mexico. Indeed, it is just below the entire gold demand of voracious Hong Kong for all of 2013 according to GFMS data (see chart).
Demand By Country (GFMS via Thomson Reuters)
Iraq had 27 tonnes of gold reserves at the end of 2013 according to the IMF data and thus Iraq has more than doubled their reserves with their allocations to gold this month. Gold remains less than 5% of their overall foreign exchange reserves showing that there is the possibility of further diversification into gold in the coming months.
The governor of the Iraqi Central Bank, Abdel Basset Turki, told a news conference that, “the bank bought 36 tonnes of gold to boost reserves and this move is to strengthen the financial capacity of the country and increase the elements of security and insurance reserves of the Central Bank of Iraq.”
He said, "the purchase quantity comes with the aim of achieving the highest stages of the financial soundness for Iraq". He pointed out that the measure comes within the purview of the central bank in the use of the fiscal policy tools of Iraq.
“The Bank has purchased large quantities of gold bullion with a very high purity and in accordance with the approved international standards,” according to the Iraqi central bank.
He added that “the central bank seeks through the purchase of large quantities of gold to stabilize the Iraqi dinar against foreign currencies."
Iraq quadrupled its gold holdings to 31.07 tonnes over the course of three months between August and October 2012, data from the International Monetary Fund shows. The IMF’s monthly statistics report showed the country’s holdings increased to some 23.9 tonnes in August 2012 to 29.7 tonnes.
That was followed by a 2.3-tonne rise in September to 32.09 tonnes and then a cut of 1.02 tonnes in October 2012 to 31.07 tonnes.
It is Iraq’s first major move to bolster its gold reserves in months.
The central bank of Iraq's doubling of its gold reserves this month is important as there are many oil rich nations in the world with sizeable foreign exchange reserves, primarily in dollars, and only a small allocation to gold by these central banks alone could lead to higher gold prices.
36 tonnes is a lot of physical gold, however in terms of dollars it is worth just $1.522 billion which is a tiny fraction of the $80 billion of foreign exchange reserves that Iraq holds.
Energy rich Russia alone has foreign exchange reserves of some $440 billion. Should they decide to allocate a sizeable portion of their reserves to gold, it would rapidly result in materially higher prices.
Signs that the global economy is slowing down and the most serious confrontation between Moscow and the U.S. and its allies since the end of the Cold War is likely to lead to central banks continuing their foreign exchange diversification.
Central banks and the smart money will continue to dollar cost average and accumulate bullion on dips.
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Two months ago, Incrementum Liechtenstein released its chartbook entitled "Monetary Tectonics" which illustrated the raging war between inflation and deflation in 40 charts. Meantime, the authors of the chartbook have launched the "Austrian Economics Golden Opportunities Fund," a fund that takes investment positions based on the level of inflation. The key tool in their investment decisions is the "Incrementum Inflation Signal" (also referred to as the "monetary seismograph"), a continuing measurement of how much monetary inflation reaches the real economy based on a series of market-based indicators.
The Incrementum Inflation Signal started showing rising inflationary momentum after a period of 19 month of disinflation. Is Inflation making a comeback just as the consensus worries about deflation risk? That was the subject of Incrementum's first Advisory Board in which much respected names have a seat, including James Rickards, Heinz Blasnik, Rahim Taghizadegan, and Zac Bharucha. The Board was led by Ronald Stoeferle, managing director of Incrementum Liechtenstein, and its partner, Mark Valek. This article summarizes Incrementum's Advisory Board meeting. The full transcript is at the bottom of this article.
The direction of inflation is important in Incrementum's Inflation Signal, not the absolute figure. At the moment, especially central bankers and mainstream economists are scared of deflation. Further easing by central bankers could be expected going forward. Related to the Fed’s policy, Rickards expects a pause in the taper by July and perhaps increased asset purchases later this year. "They tapered into weakness. They should have not tapered in December by their own metrics, specifically inflation, employment and a few other things. I expect the sequence as follows: I think they will taper another $10 billion in April, pause in June and July, and then probably increase asset purchases later in the year (maybe August or September). That should be bullish for equities but also signal to commodity investors that inflation is on the way, because it just says that the Fed will do whatever it takes to get inflation."
In particular the commodity complex shows a significant divergence: industrial metals (especially copper) are weak while agriculturals are very strong, just like precious metals and aggregate commodities. Heinz Blasnik points to China for a better understanding of the industrial metals weakness. "Broad money supply in China (M2) is now growing at 13.2%. That is at the low end from the range of the post decade. M1 has actually collapsed to 1.5% growth from almost 40% in 2009. I think that is where the weakness of industrial metals is coming from. It's definitely China, because money supply growth is declining and also bank-lending and total lending are declining. It actually seems that house prices are beginning to turn down as well."
The interesting thing about this breakup in commodities is that "nobody" is talking about it. This seems very reminiscent of the commodities rally that started in 2000-2002.
Related to these inflationary signals, the usefulness of the CPI as a decision making tool is highly questionable. RonaldStoeferle compares today's situation with the 70ies when Paul Volcker had the mandate to kill inflation, which is in contrast to today's central planners who are desperate to create inflation. Their comfort zone is the official CPI inflation rate between 1.5% – 2.5%. They will do whatever it takes to create this inflation.
CPI statistics are not used in Incrementum's Inflation Signal; the inflation data are market based indicators. The usefulness of the CPI is highly questionable because it cannot measure anything. Central bankers, however, care about it. They would be willing to keep an even higher CPI of 2%.
Rickards believes the CPI will continue to be used by the Fed until such time as nominal rates are normalized, although he thinks we are years away from a normalization of nominal rates. "In other words: If you actually got the Fed-funds-rate to 2.5% – 4%, they would not use quantitative easing as a tool; they would use the policy rate and they would like very much to get back to that world. The problem is that they cannot get back to that world. For so long as the policy rate is zero, they will use quantitative easing. But here is the problem: The global problem in the world today is that we are in a depression. You can have growth in a depression. When you have growth in a depression it is not a recovery. That's the difference between a depression and a recession. The reason why this is an important distinction is that depressions are structural. When you have a structural problem you need structural solutions. You cannot solve it with monetary solutions because it is not a monetary problem."
Incrementum's Advisory Board sees a lot of strength in the current gold price action. In addition,Zac Bharucha points to the recent "independence" in gold. "It has been a sort of risk on, risk off trade. A lot of people have bought gold a couple of years ago because of an Armageddon scenario. And the Fed has postponed Armageddon for now. So a lot of gold got liquidated, and there was great temptation to pile into the rallying stock market. But now you are getting gold at a big discount from where it was selling 3 years ago." Some people could be looking at gold's $700 decline from its highs and consider it as a (cheap) insurance.
Stoeferle believes the strength in gold miners provides a confirmation for the metals. Just two months ago, the consensus was $1300 for the end of 2014, which was in significantly different from Stoeferle's target of $1480. Interestingly, the reversal in gold basically started when the Fed started tapering. "My view is that perhaps, in the last couple of months, the price of gold was already discounting tapering, and perhaps now it is kind of discounting the tapering of taper. So perhaps the gold price is already telling us that there is something boiling."
The problem for gold, however, is the opportunity cost with all kinds of other assets which are more a beneficiary of this inflationary politics. It could be the main reason of falling gold prices. It even looks like as if the inflationary politics had a deflationary effect on the economy by sucking a lot of funds into financial assets and out of the real economy.
Is the stock market topping? Is it in a bubble? Following indicators raise a yellow flag.
The sentiment indicators in the US markets shows a very low cash in the mutual funds, just 3.3% cash, which is a historically very low level.
Sentiment of advisors sits at the highest level since the 87 crash. So sentiment-wise the market looks very stretched.
There is some of loss of participation in the stock markets but the breadth is still good in the US. Even if the market is turning, US leading stocks will still continue to outperform.
With the prospects of extremely low real interest rates in the foreseeable future, there are almost no profitable alternatives next to stocks, given the explosion in house prices and sky high bond prices. That is exactly what the Fed is aiming for. They want investors to go to long duration assets.
The advance since the 2009 low looks exactly like the bubble model from Sornette. The volatility declines more as the stock market goes higher. These are typical bubble characteristics.
According to Heinz Blasnik, domestic US money supply growth is the decisive factor for US stocks. "The latest year-on-year growth is +7.75% which is below the 10% of 2012. So it is slowing down. But 7.75% year-on-year money supply growth is still quite a lot historically. So we have this strange situation where we have got a market which is overbought, and has extremely bullish sentiment readings. Still the market is going up and the only explanation that I can come up with is that money supply growth is still strong enough to push stocks higher. But there is a limit somewhere. The problem is that we don't know where that limit is. In 2007, it was 2.6% year-on-year growth. That was enough to burst the real estate bubble and the stock market bubble at the same time. I believe that this time around this demarcation is going to be higher. The reason for believing so is because the underlying economy is much weaker. I would expect that, if money supply growth fall to say 4,5% year-on-year growth, it would be a very big warning sign."
At the same time, velocity is going down as quickly as money supply is going up. So the question is not: "When does the money supply grow but rather when does velocity pick up?" When the velocity curve turns – that is the point when inflation comes in very rapidly. The problem is that this is a psychological threshold not a monetary threshold.
When velocity turns, it means nominal GDP is beginning to rise, and that probably means prices for other goods are starting to go up.
In addition, the following chart shows that when money supply is expanding and the central bankers are printing a lot of money and suppress interest rates, then money is flying to higher orders of production stages of the economy. It results in more investments in capital, and fewer investments in consumer goods production. Shortly before recessions begin, this process starts to turn over. Right now, it is kind of stalling out. Blasnik is not sure if that points to something meaningful, but if it were the case, it would tie in with the expectation that taper will produce later on this year much weaker economic numbers. This chart is supporting that contention (courtesy of www.acting-man.com)
In closing, there is an important point to be made about Crimea's potential impact to the financial and monetary system. Rickards sees another nail in the coffin of the role of the US dollar as a reserve currency. One should consider the following. President Obama has more or less anointed Iran as the regional hegemon in the Middle East. This is a stab in the back to Saudi Arabia which for several decades has supported the dollar by insisting that oil has to be priced in dollars. The quid pro quo is that the US would in fact insure the national security of Saudi Arabia. By backing Iran, the US has undermined the national security of Saudi Arabia and therefore Saudi Arabia has less reason to support the dollar.
At the same time, the US is about to impose financial sanctions to Russia. The Russians have reacted by saying they would not pay their dollar loans, and begin to dump US Treasury bills.
We already know what China is doing with gold. Saudi Arabia has less reason to hold dollars because of Iran. Russia has less reason to support the dollar because of the Ukraine.
This is financial warfare on a scale never seen before. Putting all this together, a large part of the world is working very hard to get out of the dollar system. That is going to be bad for the dollar, and it is going to be good for gold.
These past two weeks have been a gentle reminder of one of the most important wealth-building ideas you can learn.
This idea is more powerful than any winning stock pick or market forecast. It can mean the difference between a difficult, "penny pinching" retirement... and decades of comfortable, low-stress living.
It's asset allocation.
Put simply, it's how you divide your money among various assets, like stocks, bonds, real estate, cash, and precious metals.
Often when one area of the market "zigs," others will "zag." A good mix will reduce the ups and downs in your portfolio... and protect you from catastrophe.
If you allocate your assets wisely, you'll build safe, long-term, "sleep at night" wealth. If you allocate far too much money into one risky asset that suffers a huge crash, you'll spend years, decades even, rebuilding the wealth you lost. Just ask anyone who had too much money in tech stocks in 2000... or too much money in real estate in 2007.
How much you put into each asset class depends on your age, your risk tolerance, your income, and a dozen other factors. (I featured a sample portfolio from Dr. David Eifrig earlier this year. You can find it right here.) But no matter your personal mix, you must make sure to have some portion of your money allocated to both stock and "non stock" assets.
Let's take a look first at the week before last, March 7 to March 14.
Over five days of trading, the benchmark S&P 500 (the black line on the chart below) dropped 2%. Meanwhile, two "non stock" assets I've recommended to DailyWealth Traders – silver fund SLV (the blue line) and municipal-bond fund NIO (the green line) – climbed. Silver jumped 2.7%. Muni bonds jumped 1.9%.
In short, stocks "zigged." Bonds and precious metals "zagged." If you had money in each asset, your losses in stocks were offset – at least in part – by the gains in other areas.
You might look at this and think, I'd have been better off not having money in stocks at all. But take a look at the next chart... It's last week's price action.
You'll see stocks rose 1.4%. The muni bond fund dropped 1.1%. And silver dropped a huge 5.3%.
At the start of today's essay, I said the recent price action was a "gentle" reminder of the importance of good asset allocation. None of these assets collapsed.
But you need to be prepared for when something does collapse. You need to be prepared to see stock prices fall in half. You need to be prepared to see the same in precious metals and bonds.
Basic risk-management strategies like position sizing and stop losses will help. But the most important way to protect your wealth is through intelligent asset allocation.
If you haven't looked at your asset mix recently, do it this week. It could save you from catastrophe down the road.
Crux note: If you never want to miss another essay, follow Amber on Facebook. (You'll need to sign into your Facebook account and hit "Follow.")
Why Speculation About MH370 is Evidence of Innumeracy TJ Radcliffe. Haha, my attitude has been “This speculation is a waste of time, we’ll eventually find out what happened, even if “eventually” is a long time from now.” And this story is clearly being pushed hard in the US and UK. You don’t see it getting anywhere near as prominent coverage in the Nikkei or Xinhua, when the crash was in their back yard and the flight had a large number of Chinese passengers.
Health insurance basics stump many Obamacare shoppers, survey finds Los Angeles Times. Also increases odds that some of the supposedly happy Obamacare policyholders don’t understand what they bought and will be less happy when they find out that they have high deductibles and/or are in narrow networks.
Revealed: Visitor logs show full extent of Pierre and Pamela Omidyar's cozy White House ties Pando. And this today: First Look publishes new editorial independence statement after Pando reveals Omidyar White House ties Pando. These statements about independence are not terribly credible in the light of reports that Omidyar is the most active person on First Look’s internal e-mails.
Bankers’ Deaths Shine Light on Stress in Industry, Tunnel Vision Bloomberg. The industry has long demanded insane hours, so I am wondering why this is happening now, as opposed to 30 years ago. It may be that the gap between what high end banking and any exit options pay (even in finance) pay that the incumbents feel locked in (that in the old days, people would find new jobs and now they won’t even consider that). When I was at Goldman, the partners would remark when someone got married, “Now we really have him.”
More lies from Obama on ObamaCare? Film at 11! Naked Capitalism readers are already familiar with ObamaCare’s narrow networks, and how narrow networks restrict access to specialists for those thrown into ObamaCare’s shopping experience. Now it turns out that ObamaCare’s narrow networks apply specifically to cancer treatment, and that poor people with cancer will be less likely to be able to select policies that could save their lives. As we shall see, just because Obama’s Lies have grown more prolix and lawyerly doesn’t mean they’re any less Big.
“[OBAMA:] For the average person[1], many folks who don’t have health insurance initially[2], they’re going to have to make some choices[3]. And they might end up having to switch doctors, in part because they’re saving money[4].”
Let’s parse out the words of our Insurance Salesman-in-Chief. (spoiler alert: The worst lies are #3 and #4.)
#1 “For the average person.”Averages are said, rightly, to mislead, as when Bill Gates walks into a bar and instantly raises the average income of everyone there. As we have pointed out in exhaustive detail, ObamaCare relentlessly creates second-class citizens, randomly, whether by income, employment, marital status, or jurisdiction. ObamaCare is a profoundly unjust program, and when Obama invokes the average, he conceals the injustice.
#3 “They’re going to have to make some choices.” Trivially, yeah. That’s what the word “mandate” means. Obama’s verbiage conceals two issues, at least: First, as we’ll see below, the process “folks” (how I hate that Beltway locution) will use to make those choices lacks transparency and discriminates based on income.
#4 “In part because they’re saving money.” I bow in awe to the weasel wording of “in part.” Again, we’ll see more below, but NC readers will already have spotted that people may also have to switch doctors because of narrow networks, not just “saving money,” as Obama would have it.
Let’s break down lies #3 and #4 in more detail.
ObamaCare’s “Choices” Work Against The Poor
The ObamaCare marketplace is a neoliberal ideological construct (“because markets”); its vision of how life should be lived, and not a serious attempt at problem solving with public purpose in mind. (If it had been, the success of the Canadian single payer model in providing equal quality of care for much less money would be part of the discourse; it’s not.) As Corey Robin points out, neoliberals like Obama (“they’re going to have to make some choices”) see shopping as an unalloyed good:
In the neoliberal utopia, all of us are forced to spend an inordinate amount of time keeping track of each and every facet of our economic lives. That, in fact, is the openly declared goal: once we are made more cognizant of our money, where it comes from and where it goes, neoliberals believe we'll be more responsible in spending and investing it. Of course, rich people have accountants, lawyers, personal assistants, and others to do this for them, so the argument doesn't apply to them, but that's another story for another day.
The dream is that we'd all have our gazillion individual accounts… and every day we'd check in to see how they're doing, what needs attending to, what can be better invested elsewhere. It's as if, in the neoliberal dream, we're all retirees in Boca, with nothing better to do than to check in with our broker. … In real (or at least our preferred) life, we do have other, better things to do.
For a new study released today in the Proceedings of the National Academy of Sciences, researchers asked 3,414 Americans a battery of questions about Obamacare. [T]hey also targeted a sub-set that could stand to benefit from the law: people who are eligible for Medicaid, the uninsured, or those who make between 100 and 400 percent of the poverty level and thus qualify for the subsidies to buy health insurance.
The results were bleak—just two-thirds of the overall respondents knew that they had to get health insurance this month or face a penalty. Just over half knew about the exchanges to buy health insurance through Healthcare.gov, and less than half knew there might be subsidies available to help them afford coverage.And less than a third knew about the finer points of the law, like the fact that plans must now offer certain required benefits or that people cannot be denied coverage because of pre-existing conditions.
“Clearly some of those most likely to be affected by the ACA were ill-prepared to navigate the new health insurance environment,” the researchers wrote.
Perversely, insured people and richer people had more knowledge about the ACA, and about how health insurance works in general, than did the uninsured. Knowledge about both the law and concepts such as premiums and deductibles increased with income.
Why would this be?
[Mollyann Brodie, a pollster for the Kaiser Family Foundation] points out that uninsured people are more likely to be poor, so they might be “working one or two jobs, trying to get their kids to school. They have complicated and stressful lives.” That, combined with negative news coverage, might explain the don’t-know-but-don’t-like phenomenon.
(Again, with single payer, as in Canada, ObamaCare’s “tax on time” wouldn’t exist, and the neo-liberals designing the program wouldn’t be making the assumption that every American has a personal accountant to wrangle their paperwork.[1]) Quoting (once again) Wendell Potter on a real-life example of how Obama’s “tax on time” plays out:
And I also know that insurers benefit from the marketplace confusion that "choice and competition" can create. I can assure you that some insurers are counting on you becoming overwhelmed by all the choices and picking a plan that might appear at first glance to be a bargain. But beware: if you're not careful and pick a plan without really kicking the tires, you very possibly will be buying something that could wind up costing you much more than you ever imagined if you get sick or injured.
That happened to my friend Donna Smith, who as executive director of the Health Care for All Colorado Foundation, knows more about health insurance than most of us. She spent quite a bit of time last fall on the Colorado exchange trying to figure out which plan would offer the best value for her and her husband. If she had to do it over again, she would have taken the additional step of calling the insurance companies directly after reviewing the plans they were offering on the exchange, just to be certain of what her out-of-pocket obligations would be if she had to be hospitalized during the year.
A cancer survivor, Donna knew there would be a chance she might get sick again and need expensive care [Rule #2]. It never occurred to her, though, that picking a gold or platinum level plan with a higher premium would likely have been better deal than the silver Kaiser Permanente plan she opted for and that seemed to be more affordable.
To make shopping for coverage even more challenging, Kaiser and most other insurers offer several silver plans on the Colorado exchange, so Donna had to spend time trying to figure out which silver plan would be the best deal.
Donna told me the she took the time to compare the monthly premiums, co-pays and annual deductibles of each of the silver plans before making her decision. "I felt that the one I chose offered the most coverage I could afford with my premium buying dollar," she said.
Sure enough, within days after the plan went into effect on January 1, Donna got sick and was hospitalized for a week.
To her shock, she later found out some limitations of her coverage that made her overall financial responsibility much higher.
Smith was clearly very knowledgeable about health insurance, and she was able to pay ObamaCare’s “tax on time.” But what if she hadn’t been? Statistically, it’s clear that a large percentage of the poor people won’t be able to pay what Smith could pay; that some of them will not match ObamaCare policies to their health needs; and that some of them will die when they cannot get needed care. Because markets.
ObamaCare’s “Choices” May “Save Money” But There Are Lives It Will Not Save
The “tax on time” to make choices assumes that the choices given are fair, that the choices are clearly stated, and that the outcomes of the choices are not skewed. Unfortunately, none of this is true. Again, statistically, all of these failures — if failures they are — will have lethal consequences; it’s like ObamaCare is a giant maze that only some rats animal models will be able to run, while random others are “sacrificed.”[2]
First, under ObamaCare, your “choice” — your subsidy and the plans available to you — is based on a formula that’s not transparent. You have no way of verifying or reasoning about what bucket they throw you into!
Incorrect poverty-level guidelines are automatically telling what could be tens of thousands of eligible people they do not qualify for subsidized insurance.
The error in the federal marketplace primarily affects households with incomes just above the poverty line in states like Pennsylvania that have not expanded Medicaid. The mistake raises the price of their insurance by thousands of dollars, making insurance so unaffordable many may just give up and go without. …
It also highlights what some public policy experts say is a troubling lack of transparency in the marketplace’s eligibility determinations.
“It is almost impossible to work back from a decision and see what they did,” said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities in Washington. Ideally, she said, a notice would say, “We have found that your income for 2014 will be X, and based on that income your tax credit will be Y.”
[T]he official determination letters simply state the amount of your tax credit and resulting insurance premium. “I would have no idea if it’s right or wrong,” Solomon said.
Melanie Lapidus, vice president for managed care at Barnes-Jewish Hospital in St. Louis, home to Siteman Cancer Center, said she doesn’t think patients realize the exchanges offer a more restrictive kind of private insurance.
Lapidus cited Anthem Blue Cross and Blue Shield, which includes Siteman in many of its plans outside the Missouri exchange, but none within the exchange.
“We have had many people say to us, `I picked Anthem because you guys are always in their products, and I assumed you would be in their exchange products,’” Lapidus said. “It’s still hard to tell who is in network and who is not.”
(Partly this is a “tax on time” issue, but it’s additionally a branding issue; the ratsanimal modelsconsumers citizens actually trusted the Anthem brand. Anthem, of course, is laughing all the way to the bank, where, having minimized its payouts, it will also deposit its massive subsidies.)
Third, and most lethally, all these strictures apply directly to cancer patients. Via CBS:
Cancer patients relieved that they can get insurance coverage because of the new health care law may be disappointed to learn that some the nation’s best cancer hospitals are off-limits.”
In all, only four of 19 nationally recognized comprehensive cancer centers that responded to AP’s survey said patients have access through all the insurance companies in their state exchange.”
“This is a marked deterioration of access to the premier cancer centers for people who are signing up for these plans,” [Dan Mendelson, CEO of the market research firm Avalere Health] said.”
By not including a top cancer center an insurer can cut costs. It may also shield itself from risk, delivering an implicit message to cancer survivors or people with a strong family history of the disease that they should look elsewhere.”
For now, the issue seems to be limited to the new insurance exchanges. But it could become a concern for Americans with job-based coverage too if employers turn to narrow networks.”
So, if you’re a ratsanimal modelsconsumers citizen with cancer, or with cancer concerns, and you’ve been forced onto the ObamaCare Marketplace (as opposed to being forced into Medicaid or having employer-based insurance) all you have to do for a successful shopping experience is:
1) Pay the tax on time to do your research, or
2) Pay the tax on time by having somebody else do your research, like your personal accountant.
3) Make sure you understand and document your eligibility for plans and subsidies in case you need to challenge ObamaCare’s eligibility determination later (or optimize your application).
4) Make sure you understand the cancer centers (if any) included in your plan’s narrow network.
5) Don’t allow insurance company branding to deceive you.
Oh, and hope the plan doesn’t change next year, so you don’t have to go through the same process all over again.
Of course, with a single payer system, none of these steps would be needed, but we can’t have single payer because markets, that being Rule 1 of Neoliberalism. And since a percentage of ratsanimal modelsconsumers citizens running the ObamaCare maze will, predictably enough, fail to get the plan (if any) that gives them the care they need, Go Die.That being Rule 2 of Neoliberalism.
But do enjoy your shopping experience!
NOTE
[1] Hilariously, the solution the author of the Atlantic piece seems to suggest would only add additional layers of complexity to the complexity: Creating “health literacy” would require more marketing collateral, more training, more “explainers” (that is, more jobs for people very much like the author). A solution others suggest is to “nudge” people into getting coverage by putting the lowest priced plans at the top of the plan selection lists “to minimize the decision-making required.” Obviously, from the perspective of anybody who swore the Hippocratic oath, this proposal is vile and wrong and demands that ObamaCare be opposed (and its nudge theory advocates pilloried). I mean, shouldn’t people be “nudged” to select the best plan for their health needs, as opposed to the financial (and political) goals of the “progressive” program designers?
[2] In politics, this is called being “thrown under the bus.”
"The technical funds are still massively long despite the sell-off we've had"
¤ Yesterday In Gold & Silver
It was obvious that the gold price was going to have a rough go of it on Monday. By around 10:30 a.m. Hong Kong time, gold was down ten bucks---and volume was well over 20,000 contracts, which is extremely high for that time of day, so the HFT boyz were busy. After that, not much happened until precisely 8:30 a.m. EDT---and the New York HFT traders had their work done for the day by 11:30 a.m. The gold price traded pretty flat from there into the 5:15 p.m. EDT close.
The CME Group recorded the high and low ticks at $1,335.70 and $1,308.50 in the April contract.
Gold closed in New York at $1,309.60 spot, down $25.10 from Friday's close. Gross volume was well over 200,000 contracts, but once the roll-overs out of the April delivery month were subtracted, the volume netted out at around 118,000 contracts.
Here's the New York Spot Gold [Bid] chart---and you can see where the HFT boyz showed up at exactly 8:30 a.m.
The silver price action was fairly similar, as it was already down a bunch by 10:30 a.m. in Hong Kong, but the real engineered price decline didn't begin until 10:45 a.m. in New York---and most of silver's losses on the day came from that point onwards.
The high and low price ticks in the May contract for silver were reported as $20.315 and $19.92
Silver finished the Monday session in New York at $19.93 spot, which was down 34.5 cents from it's Friday close. Volume, net of March and April, was 42,500 contracts.
Platinum rallied a bit during early Far East trading, with the high tick coming at 9 a.m. Hong Kong time---and from thereon in the price chopped unsteadily lower for the remainder of the day. The low tick came at precisely 4 p.m. EDT in New York. Here's the chart.
Palladium did nothing in Far East trading, but had another go at the $800 spot price mark, only to run into a short seller of last resort. From that point it headed lower, hitting its low around 11:45 a.m. EDT. At that point, a willing buyer showed up and bid it back to unchanged by 1 p.m. After that, it didn't do much.
The dollar index closed in New York late on Friday afternoon at 80.12---and then didn't do a thing until the 8 a.m. GMT London open. After getting rescued from falling below the 80.00 mark at that point, the dollar 'rallied' to it's 80.28 high minutes after 10 a.m. in London. After that it chopped quietly lower before falling off a 35+ basis point cliff starting just after 1 p.m. in New York. The low of 79.79 was in just minutes before 2 p.m., as someone was there to catch the proverbial falling knife. From there it rallied a bit, cutting its losses on the day, as the index closed at 79.94.
There wasn't a hint of a price change in any one of the precious metals on this precipitous 1-hour drop in the dollar index.
The gold stocks gapped down about a percent at the open---and then followed the gold price lower until the engineered price decline ended in that metal around 11:30 a.m. in New York. They recovered a bit, then didn't do much, before getting sold down again in the last few minutes of trading. The HUI closed down 3.99% which was at, or close to, it's absolute low of the day.
The price path for the silver equities was almost the same---and the lion's share of the day's losses were in by 11:30 a.m. From there, the equities slid another percent into the close---and Nick Laird's Intraday Silver Sentiment Index closed down a whopping 6.63%. So much for my theory of someone buying up silver equities on the sly, as the loses yesterday were out of all proportion to the drop in the metal itself.
The CME Daily Delivery Report showed that 2 gold and 156 silver contracts were posted for delivery within the Comex-approved depositories on Wednesday. The largest short/issuers were Jefferies and ABN Amro with 97 and 58 contracts respectively. Jefferies was also the biggest long/stopper with 56 contracts---and in second and third place came Canada's Scotiabank and JPMorgan Chase out of it's in-house [proprietary] trading account---with 42 and 24 contracts respectively. The link to yesterday's Issuers and Stoppers Report is here.
Another day---and another surprise deposit in GLD. This time an authorized participant added 144,535 troy ounces. Based on the price action, this looks like another deposit made to cover an existing short position. And as of 10:28 p.m. EDT yesterday, there were no reported changes in SLV. There has been no in/out activity of any significance in SLV since March 3---and I'm sure that's just the way JPMorgan wants to keep it until they've bought all the physical silver they can get their hands on.
There was a decent sales report from the U.S. Mint to start the week yesterday. They sold 1,000 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 654,500 silver eagles. They also reported selling 300 platinum eagles as well. The question still unanswered is: Who is buying all these silver eagles, as it's not the general population.
A decent amount of gold was reported received over at the Comex-approved depositories on Friday, as 192,732 troy ounces were shipped in---and nothing was shipped out. About 5 tonnes went into JPM's vault---and about a tonne into HSBC USA. The link to that activity is here.
As big as the activity in gold movement was, it paled in comparison to what happened in silver last Friday, as 1,141,122 troy ounces were shipped in---and 1,115,180 troy ounces were reported shipped out. The big activity was at Brink's, Inc., CNT---and Canada's Scotiabank. The link to the action is here---and is worth a quick look.
Here's a chart that I thought worth sticking in today's column at this point. It's the 3-year gold/silver ratio---and as you can tell at glance at almost 66 to 1---it's about the highest it has been in the last three years. It shows how horrible under-priced silver is vs. gold.
Since today is Tuesday, I have more than the normal quota of stories for you today---and I hope you have the time to wade through the ones that interest you.
¤ Critical Reads
Goldman Sachs Just Threw Stock Exchanges Under the Bus
In an op-ed about high frequency trading, Cohn wrote that the entire business model of exchanges like the New York Stock Exchange and the NASDAQ hurts markets. The exchanges get paid based on the volume of quotes (order instructions) that flow through them. That's quotes, not actual executed trades. From the op-ed:
The economic model of the exchanges, as shaped by regulation, is oriented around market volume. Volume generates price discovery and liquidity, which are clearly beneficial. But the industry must recognize how certain activities related to volume can place stress on a market infrastructure ill-equipped to deal with it.
Electronic-order instructions connect the objectives of buyers and sellers to actions on exchanges. These transaction messages direct the placement, cancellation and correction of orders, and in recent years they have skyrocketed. In the 2010 "flash crash," a spike in the volume of these messages exacerbated volatility, overwhelming the market's infrastructure.
"Apparently Goldman Sachs believes it has squeezed almost every penny out of HFT that it can." is what Bill King had to say about this op-ed piece I found in Monday's King Report. This absolute must read story, along with the embedded link to the op-ed piece, was posted on the businessinsider.com Internet site on Friday afternoon.
A federal jury on Monday found five associates of the convicted swindler Bernard L. Madoff guilty of 31 counts of aiding one of the largest Ponzi schemes in history.
With that verdict, the jurors rejected the former employees’ central defense: that only Mr. Madoff had known the evil purpose behind the chores he told them to carry out, while they had simply trusted for decades in the honesty of a man widely known and respected on Wall Street.
“There’s really no dispute here that there was a massive criminal conspiracy,” John T. Zach, an assistant United States attorney, told the jury early this month, in the closing weeks of a trial that had lasted more than five months.
The only question, he said, was whether the defendants knowingly committed fraud to help Mr. Madoff sustain that criminal enterprise. “So let me state it to you as clearly as I can,” he said: “The defendants knew that fraud was going on at Madoff Securities.”
This news item showed up on The New York Times website yesterday afternoon EDT---and it's courtesy of reader Phil Barlett.
JPMorgan Chase Bets $10.4 Billion on the Early Death of Workers
Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself. Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off.
According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees.
The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees.
I posted a story about this a couple of years or so ago, but it's worth revisiting. This version of things showed up on the wallstreetonparade.com Internet site yesterday---and it's courtesy of U.A.E. reader Laurent-Patrick Gally.
Lloyds' top management bonuses potentially worth more than £27 million
Bailed-out Lloyds Banking Group has handed its top management team – including chief executive António Horta-Osório – bonuses potentially worth more than £27m.
The announcement by the 33% taxpayer-owned bank covers awards of bonuses for 2013 and 2014 – some of which do not pay out for three years – and follows its disclosures this month that its senior executives shared £12m of bonuses that had paid out from previous years.
It comes amid a sharpened focus on bankers' pay following a series of mis-selling scandals and attempts by the top banks to sidestep the E.U. bonus cap, which restricts bonuses to 100% of salary or 200% if shareholders approve.
This news item about piggies-at-the-trough showed up on The Guardian's website early yesterday evening GMT---and it's the first offering of the day from Roy Stephens.
15 years on: Looking back at NATO's 'humanitarian' bombing of Yugoslavia
Exactly 15 years ago, on March 24, NATO began its 78-day bombing of Yugoslavia. The alliance bypassed the UN under a “humanitarian” pretext, launching aggression that claimed hundreds of civilian lives and caused a much larger catastrophe than it averted.
Years on, Serbia still bears deep scars of the NATO bombings which, as the alliance put it, were aimed at “preventing instability spreading” in Kosovo. Questions remain on the very legality of the offense, which caused casualties and mass destruction in the Balkan republic.
Codenamed 'Operation Allied Force,' it was the largest attack ever undertaken by the alliance. It was also the first time that NATO used military force without the approval of the UN Security Council and against a sovereign nation that did not pose a real threat to any member of the alliance.
NATO demonstrated in 1999 that it can do whatever it wants under the guise of “humanitarian intervention,” “war on terror,” or “preventive war” – something that everyone has witnessed in subsequent years in different parts of the globe.
This commentary showed up on the Russia Today website in the wee hours of yesterday morning Moscow Time---and it's also courtesy of Roy Stephens.
Dancing with the Bear: Merkel Seeks a Hardline on Putin
German Chancellor Angela Merkel has spent many years trying to understand Russian President Vladimir Putin. But even she didn't expect him to annex Crimea. Now, she and her European counterparts are struggling to come up with a response.
Last Monday was a day of historic comparisons for Angela Merkel's Christian Democratic Union (CDU). Immediately prior, almost 97 percent of voters on the Crimea Peninsula had voted in favor of joining Russia, an outcome that reminded the chancellor of the East Germany where she grew up. "Every result over 90 percent in this world has to be viewed with skepticism," Merkel said. After a brief, dramatic pause, she added: "With the exception of my election to the party chairmanship, of course."
Her comment was greeted with laughter, but it would remain the only buoyant moment that morning. The focus of the meeting was squarely on Russia and the crisis in Ukraine. Hesse Governor Volker Bouffier spoke of the West's "distressing helplessness" in the face of Russia's annexation of Crimea and said he was reminded of the year 1938 when the world did nothing to prevent Adolf Hitler's takeover of the Sudetenland in what was then Czechoslovakia. CDU General Secretary Peter Tauber, who holds a Ph.D. in history, pointed out that, just as now with the Winter Olympics in Sochi, there had been an Olympics prior to the Sudetenland seizure: 1936 in Berlin.
Comparing Crimea's vote to join Russia to Hitler is a bit over the top---but the main stream media in the West is going out of its way to make mountains out of molehills---and this inflammatory article is typical. This article was posted on the German website spiegel.de yesterday---and it's another offering from Roy Stephens.
Russia Is Ousted From Group of 8 by U.S. and Allies
President Obama and the leaders of the biggest Western economies agreed on Monday to exclude President Vladimir V. Putin from the Group of 8, suspending his government’s 15-year participation in the diplomatic forum and further isolating his country.
In a joint statement after a two-hour, closed-door meeting of the four largest economies in Europe, along with Japan and Canada, the leaders of the seven nations announced that a summit meeting planned for Sochi, Russia, in June will now be held in Brussels — without Russia’s participation.
“This group came together because of shared beliefs and shared responsibilities. Russia’s actions in recent weeks are not consistent with them,” the statement said. “Under these circumstances, we will not participate in the planned Sochi Summit. We will suspend our participation in the G-8 until Russia changes course.”
This story, filed from The Hague, was posted on The New York Times website yesterday sometime---and I thank Roy Stephens for sending it our way.
Russia not clinging to G8 if West does not want it – Russian Foreign Minister
Russia is not clinging to the G8 format, as all major world problems can be discussed at other international venues such as G20, Russia’s Foreign Minister Sergey Lavrov has said.
“The G8 is an informal club, no one gives out membership cards and no one can expel members,” Lavrov told a media conference at the Hague. “If our Western partners believe that this format has exhausted itself, let it be. We are not clinging to it.”
He went on to say that many believe that the G8 has already fulfilled its mission as many issues are now discussed at the G20 forum.
“Generally speaking, there are also other formats for considering many questions, including the UN Security Council, the Middle East Quartet and the P5+1 on the Iranian nuclear problem,” Lavrov told journalists.
This news item was posted on the Russia Today website very early Monday evening Moscow time---and it's also courtesy of Roy Stephens.
Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself. Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off.
According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees.
The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees.
I posted a story about this a couple of years or so ago, but it's worth revisiting. This version of things showed up on the wallstreetonparade.com Internet site yesterday---and it's courtesy of U.A.E. reader Laurent-Patrick Gally.
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
Fund manager, geopolitical strategist, author, and éminence grise James G. Rickards has given what seems like his best interview ever -- to GATA's Dutch friends, China gold researcher and consultant Koos Jansen and the entrepreneur and author Willem Middlekoop.
Jansen and Middlekoop get Rickards to argue that China was likely the instigator of the smash down of the gold price last April and that the German Bundesbank does not really want to repatriate its gold from the Federal Reserve Bank of New York because the Bundesbank wants to engage in gold price suppression that can be done only by leasing gold in New York, not in Frankfurt.
There's much else of interest in the interview, which is posted at Jansen's Internet site, ingoldwetrust.ch, headlined "Jim Rickards on the Death of Money". Harold Jacobsen was the first through the door with this story.
1. The first one is a 38-minute audio interview with Jim. It's on Crimea / Russia / Ukraine and Financial Warfare, Russia / China / Saudi potential combination effect of stepping away from the U.S. Dollar, Mutually Assured (Financial) Destruction, “Gold is the only asset that you can't wipe out digitally”, and Yellen’s shocking benchmark change. It was posted on the physicalgoldfund.com Internet site on Wednesday, March 19---and it's courtesy of Harold Jacobsen.
2. The second is headlined "Jim Rickards: China is importing gold secretly using military channels---and it's a written Q&A session that doesn't go on too long.." Here's Chris Powell's comments on this interview: "Fund manager, geopolitical strategist, and author James G. Rickards, who seems to be everywhere these days---and who today is to speak at the Mines and Money conference in Hong Kong along with your secretary/treasurer, gives an interview to Mexican financial journalist Guillermo Barba in which he gets more explicit than ever about gold price suppression by central banks and sounds very much like GATA. Rickards says:
"Central banks still have the ability to manipulate gold prices through gold leasing to commercial banks, which then use the leased gold to sell unallocated gold to customers using leverage. But the demand for physical gold by China and others is making leasing and paper gold transactions more difficult because there is less physical to support the trading and greater risk of default by a market participant who suddenly finds itself unable to obtain physical gold to satisfy some paper contract. All manipulation breaks down eventually because market participants begin to pile on the other side of the trade to test the will and resources of the manipulators. When the current manipulation breaks down, probably in the next year or two, gold will surge higher based on fundamental supply and demand. In that environment prices of $3,000 per ounce would not be surprising, although gold may eventually go to $9,000 per ounce or more if needed to restore lost confidence in the international monetary system."
Rickards' interview with Barba is posted at the latter's Internet site, inteligenciafinancieraglobal.blogspot.mx. Reader Harold Jacobsen was the first person through the door with this interview as well---and the link to that one is here.
It was suspected and litigation alleges the gold market is being manipulated by major Western central banks, led by the Federal Reserve.
Despite the great power of central banks, however, it appears that gold is starting to rise for fundamental reasons of demand.
AIS Capital Management LP filed a class-action, antitrust lawsuit in federal court in New York against five international banks: the Bank of Nova Scotia, Barclays Bank, Deutsche Bank, HSBC Holdings and Société Générale. The suit alleges that these banks conspired to manipulate the price of gold for their own gain and follows announcements of official investigations in the United Kingdom and in Germany regarding the London Gold Fix.
Like the London Inter Bank Offered Rate, or LIBOR, used to base key international interest rates, the London Gold Fix forms the spot price benchmark for major gold transactions. The LIBOR scandal rocked the financial world.
Although you've heard most of what the author has to say before, it's still worth reading---and it's a story that I found in a GATA release yesterday.
Silver Bullion Pte, a Singapore supplier of coins and bars to retail investors, opens a 600 metric ton vault tomorrow as investor demand increases.
The storage could hold silver worth $390 million at prices on March 21. The company doubled sales to 1.04 million ounces in 2013 from 517,000 ounces a year earlier, said Gregor Gregersen, who founded the company in 2009. Almost all the sales were silver, he said in an interview in Singapore on March 18.
“While prices dropped last year, we saw physical demand went through the roof,” said Gregersen. “Our American customers seem to be concerned about rising government debt in their country and see silver as a form of insurance.” Marketable U.S. government debt outstanding has soared to a record $12 trillion from $4.5 trillion in 2007, according to U.S. Treasury data compiled by Bloomberg.
This Bloomberg story, filed from Singapore, showed up on their Internet site in the wee hours of Monday morning Denver time---and I thank reader 'David in California' for bringing it to our attention. It's worth reading as well.
One of Doug Casey’s mantras is that one should buy gold for prudence, and gold stocks for profit. These are very different kinds of asset deployment.
In other words, don’t think of gold as an investment, but as wealth protection. It’s the only highly liquid financial asset that is not simultaneously someone else's obligation; it’s value you can liquidate and use to secure your needs. Possessing it is prudent.
Gold stocks are for speculation because they offer leverage to gold. This is actually true of all mining stocks, but the phenomenon is especially strong in the highly volatile precious metals.
Most typical “be happy you beat inflation” returns simply can’t hold a candle to stocks that achieved 10-bagger status (1,000% gains). In previous bubbles—some even generated 100-fold returns. And we may see such returns again.
Gold, and their stocks, will only rise to these levels when JPMorgan et al decide that's what will happen. This commentary by Casey Research's own Laurynas Vegys, was embedded in yesterday's edition of the Casey Daily Dispatch---and it's definitely worth your time.
I have found a gold forecaster with a 100% accuracy rate. Below is a chart of two of his recent predictions.
The first arrow marks the 15th of January when he said to "use narratives, not just charts, to tell if gold's bottom may be near", noting that mainstream commentary was a "precursor to more bullish narratives. It also gives confidence to smart money to start to get into the market"
The second arrow marks the 15th of March when he said that he "would not be surprised to see it correct down" and that "there will be corrections on the climb back up" during the rest of 2014.
Of course the forecaster is me, and the 100% accuracy rate is misleading as I've only made these two calls in the entire time I've blogged (here and here), but hey, since when does the full truth matter in click baiting headlines?
Now given that my sample size is only two forecasts, you can probably bet against my next call as there is no way I can maintain a 100% accuracy rate. I'm not ready to make a call for a bottom in this correction so at this time will just expand on the March 15 comments I made in an interview with Al Korelin.
In that interview I noted negative premiums on the SGE were possibly indicative of bullion banks having overestimated Chinese New Year demand (BBs stockpile ahead of these high demand periods, see here for some evidence of this). Perth Mint has seen some on and off weakness in kilobar premiums recently and this was confirmed by Ed Steer noting that JP Morgan received exactly 160,750.000oz of eligible gold into their Comex warehouse on March 20. This is exactly 5 tonnes, which readers of this blog know is indicative of kilobars. If the Chinese are so hot for gold right now, why is JPM putting kilobars into a NY warehouse?
For a current read on the market I think you have to take a narrative approach I discussed in that January 15 article - and that is mainstream financial markets narratives, not goldbug narratives, as that is where the big money is. Where is that narrative now? First this Business Insider article quoting Goldman:
"we see potential for a meaningful decline in gold prices towards the level implied by 10-year TIPS yields, which our rates strategists expect to rise further this year, and reiterate our year-end $US1,050/toz gold price forecast. More broadly, we believe that with tapering of the Fed's QE, US economic releases are back to being a key driving force behind gold prices"
And this from the Australian Financial Review via Macro Business, quoting some nobody and SocGen:
"Gold is going to be somewhat problematic from an investment standpoint over the next six to 12 months. We're probably looking to a relatively higher and quicker increase on rates, which is a headwind for precious metals."
"We continue to believe that the economic momentum in the US shows further improvement, we reiterate our very bearish outlook for this year. Prices could drop below $US1,000. I would not rule that out."
The important thing is these people believe this stuff, that the US is "improving" and they will trade gold accordingly. I think it is also worth noting Dan Norcini's repeated comments that this price run up was more about short covering than new longs, and he is representative of the Comex floor "narrative".
I also note the Zero Hedge article on China Commodity Funding Deals regarding gold, which has some potential to be negative for gold, despite what some may say. Most likely their "don't worry, it is bullish for gold" interpretation comes from a lack of understanding of the deals as they probably haven't got access to the professional market commentary on that topic. That is for another post, but I will note I brought this issue to your attention in September 2012 and ZH and others who are now jumping on it could have found out a lot earlier from these articles (good background reading if you're keen) June 2013, August 2013, September 2013, December 2013 and finally from Koos Jansen, who you'd think gold bloggers would read, with this quote indicating the risk: "some enterprises in China use gold leasing from banks to solve their short-term funding problems in the hope of buying back the gold at lower levels to repay the lease. However they can be short-squeezed when gold moves higher"
So at this stage I think the risk is to the downside but will hold off on a bottom call until I can see some shift in the mainstream narrative.
Gold & Silver Trading Alert originally published on March 24th, 2014 8:58 AM:
Briefly: In our opinion short speculative positions in silver (half) and mining stocks
(full) are justified from the risk/reward perspective.
Friday was generally a calm day in the precious metals market and for the currency
indices. The initial moves higher (in the early part of the session) were mostly
invalidated later on and overall not much changed at the first sight. On second look,
the lack of rally confirmed the breakdown in mining stocks. Let's take a look (charts
courtesy of http://stockcharts.com):
Interestingly, we can summarize the above chart in the same way that we did
previously, because the daily move that we saw on Friday didn't change anything
overall:
Gold moved lower once again [on Thursday, but basically it didn't do anything on
Friday] but still not low enough to break below the rising support line. Gold is still
outperforming silver and mining stocks (taking this month into account), but now the
extent of the outperformance is much smaller. Still, with the situation in Ukraine still
being tense, gold might hold up relatively well even if the rest of the precious metals
sector declines.
At this time we see that gold's reaction to the events in Ukraine has been very
limited. When markets don't react to factors that should make them move in a certain
direction, they will likely move in the opposite direction relatively soon. In this case, it
seems that gold will move lower.
The move below the rising support line (marked in red) could symbolize the start of
another big downleg regardless of the geopolitical tensions. For now, the price of
gold is already close to this support, but not yet below it.
Silver declined more than 5% last week. It moved below the rising support lines
and closed there on Friday, which is a bearish indication. The situation in silver is
oversold, but only on a short-term basis. Consequently, we could still see a corrective
upswing here before the decline continues. Miners confirmed their breakdown, but
there was no short-term breakdown in gold, so it's not that clear whether the precious
metals sector – including silver – will move lower immediately. It could be the case
that miners while decline while metals will pause for a few more days.
The GDX ETF closed below the rising support line and the 50% Fibonacci
retracement level for the third consecutive trading day and the breakdown is now
complete. If we hadn't mentioned the extra short position in miners previouly, we
would suggest it today. Please note that the small move up that we saw in the past 2
trading days materialized on low volume after a huge-volume decline. This suggests
that the real move is down and that miners simply took a breather.
The HUI Index closed the week without a meaningful move back up, and the sell
signal from the Stochastic indicator along with its implications remain in place. We
previously commented on it in the following way:
We saw a big downswing also in the HUI Index and it resulted in a major sell signal
from the Stochastic indicator. In the past 3 years all cases (and many cases before
2011) when we saw this signal were followed by major downswings.
The USD Index finally rallied last week and it seems that this year's decline is over.
There are no sure bets in any market, but this week's rally looks very similar to what
we saw in October 2013. Back then the currency was also a little below the rising
support lines only to come back with a vengenace. We saw this type of action last
week and the outlook was bullish.
All in all, we can summarize the current situation in the precious metals market in the
same way we have been summarizing it for the last couple of days:
It seems that the precious metals sector will move lower in the coming weeks, but
just in case the situation in Ukraine deteriorates, we are keeping half of the long- term investment position in gold. In fact, gold has been outperforming both silver and
mining stocks since Russian troops entered Crimea.
The technical picture for silver and – especially – for mining stocks is bearish, so in
our opinion short positions here are justified from the risk/reward perspective. We
might add to the short position in silver and open one in gold relatively soon – we will
keep you informed.
It seems to us that if it weren't for the events in Ukraine, the precious metals sector
would be already declining and perhaps testing the 2013 lows or moving below them.
This could still take place and it's quite likely to happen once the situation in Ukraine
stabilizes.
To summarize:
Trading capital (our opinion): Short positions: silver (half) and (full) mining stocks.
Stop-loss details:
- Silver: $22.60
- GDX ETF: $28.9
Long-term capital (our opinion): Half position in gold, no positions in silver, platinum
and mining stocks.
Insurance capital (our opinion): Full position
You will find details on our thoughts on gold portfolio structuring in the Key Insights
section on our website.
As always, we’ll keep our subscribers updated should our views on the market
change. We will continue to send them our Gold & Silver Trading Alerts on each
trading day and we will send additional ones whenever appropriate. If you’d like
to receive them, please subscribe today.
Thank you.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Tools for Effective Gold & Silver Investments – SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment – SunshineProfits.DE
* * * * *
Disclaimer
All essays, research and information found above represent analyses and opinions
of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it
may prove wrong and be a subject to change without notice. Opinions and analyses
were based on data available to authors of respective essays at the time of writing.
Although the information provided above is based on careful research and sources
that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do
not guarantee the accuracy or thoroughness of the data or information reported. The
opinions published above are neither an offer nor a recommendation to purchase
or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By
reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held
responsible or liable for any decisions you make regarding any information provided
in these reports. Investing, trading and speculation in any financial markets may
involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees
and affiliates as well as members of their families may have a short or long position
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Goldman Sachs Group and Societe General can thank Fed Chair Janet Yellen for helping to get their bearish forecasts for gold back on track. Remember how both houses saw gold heading down to $1,050 because rising interest rates make it more expensive to hold precious metals that pay no interest. The question then is at what point safe haven demand trumps this issue or the Fed panics on trouble in financial markets and reverses rates.
Zeb Eckert reports on Bloomberg Television’s ‘On The Move Asia’…
The West is not just confronting Russia, but potentially China and the other Shanghai Cooperative Organization members as well. Russia’s relationship with the SCO brings with it the possibility of using gold as a weapon against the West, because most governments involved with the SCO have been actively buying gold while western central banks have [...]
This week gold fell from a high of $1390, achieved late on Sunday night European time, to a low of $1322 last night before rallying $15 on London's opening this morning. To put this fall in context, the gold price had increased by over $200 since 31st December, so the correction this week was about one third of the rise, normal in that context. The action was in gold rather than silver, whose trading volumes were subdued in comparison, and their relative performance in the year to date is shown in the chart above.
There were a number of factors undermining the gold price this week, including the following:
Ukraine/Crimea. Following the Crimea referendum the immediate threat of further escalation of the Ukrainian problem receded. This was a signal for profit-taking.
Overbought market. With the shorts substantially reduced, there were short-term bulls in the market, making it vulnerable to a bear raid which duly occurred.
China. Talk of copper-backed financing schemes in China undermined metal prices generally, and there were references to gold being used for this purpose as well. While it is known that Chinese speculators on the Mainland have used this facility it has also been suggested that many foreign speculators have also used metals to back a carry trade to invest in China. A considered analysis shows this story to have been overblown, given that estimated global stocks at less than two months' consumption appear reasonable. Furthermore, China's copper consumption is rising significantly as she invests in electricity infrastructure so she needs physical stocks.
FOMC meeting. Wednesday's statement following Janet Yellen's first FOMC meeting caused significant volatility in markets, with bond prices falling sharply, the USD rising, and equities tumbling. Markets took fright at the implication that interest rates would rise sooner than end-2015 and probably by a little more than discounted, while at the same time GDP growth might be slightly less than previously expected. Gold lost $30 on Wednesday alone. It should also be noted that following every FOMC meeting since June 2013 the gold price has fallen.
It's a pretty powerful list. The general tone of financial markets is tilting perhaps towards deflation. China is trying to slow monetary growth, leading to revised GDP forecasts, and possibly the end of her property bubble. To this we add the Fed's monetary policy, which on the basis of this week's FOMC meeting appears to be less inflationary in tone. In the cliché of old, gold is climbing a wall of worry.
All this is essentially short-term noise, so long as central banks continue to rely on printing money to rescue the global economy and the financial system at times of stress. A deflationary crisis will always provoke an inflationary response, and that is what the primary trend in gold and silver is all about.
Friday. Eurozone: Business Climate Index, Consumer Sentiment, Economic Sentiment, Industrial Sentiment. US: Core PCE Price Index, Personal Income, Personal Spending.
ends
NOTES TO EDITOR
For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je
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An article by Alasdair Macleod, Head of Research, GoldMoney
There is a fascinating story from Robert Peston, the BBC's business editor about his interview with Hank Paulson, who was the US treasury secretary at the time of the Lehman crisis. Paulson said that he was told by the Chinese that they had a message from the Russians suggesting they club together to drive down the prices of Fannie and Freddie "to maximise the turmoil on Wall Street". The Chinese declined, but in doing so they made sure the Treasury was aware that China and Russia know that between them they have the power to break western capital markets.
This presents a problem for NATO's geopolitical strategists, exposed by Russia's unchallenged absorption of Crimea. Assuming military options are a non-starter, the West's financial condition is too fragile to withstand an alternative financial war with the world's largest energy exporter and eighth largest economy, let alone a combination of Russia and China working together.
America also has a problem in the Pacific containing China's territorial ambitions, including attempted possession of the Senkaku Islands from Japan and the Scarborough Shoal from the Philippines. Unless America punishes Russia adequately for her take-over of Crimea, China may be encouraged to believe that the US is a push-over. At least, that is the worry in Washington.
This is why the US and also the UK would have gone much further than the more parochial EU in imposing sanctions against selected Russians and Ukrainians. The division of interests within NATO has allowed Putin to outmanoeuvre the west. He is now taking the steam out of the situation by stating he has no further plans with respect to other Ukrainian regions. However, this is not believed by the Ukrainian government and the West, nor indeed by the Russian people, who were given a more gung-ho message.
China's position in this should not be neglected. As co-founder with Russia of the Shanghai Cooperation Organisation (SCO), China is bound to be on Russia's side or at least to not oppose her, a point driven home by her abstention on a US-led resolution at the UN censuring Russia over Crimea. Only this morning, Putin publicly expressed his gratitude to China.
This means that the West is not just confronting Russia, but potentially China and the other SCO members as well. Russia's relationship with the SCO brings with it the possibility of using gold as a weapon against the West, because most governments involved with the SCO have been actively buying gold while western central banks have been providing it. So far the SCO members have been content to accumulate the west's gold on falling prices, being careful not to disrupt the market.
We cannot say the Ukrainian crisis is over. It is more than likely Putin will not be fully satisfied until there is a Russian-friendly government in Kiev. And if a senior Russian politician cares to have another conversation with China over maximising turmoil on Wall Street, driving up the gold price is the obvious financial weapon of choice.
Ends
NOTES TO EDITOR
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The stench of a well-trodden cow pasture is emanating from the Zerohedge article which tries to blame the decline in the price of gold during 2013 on China's use of a complicated commodities financing structure. Long time readers know that I always give ZH credit for digging up a lot of information and news [...]
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